Pressure in the Pipes: Funding Stress Q&A
Zachary Griffiths, CFA - Head of IG & Macro Strategy, CreditSights
Winnie Cisar - Global Head of Strategy, CreditSights
Brian Perez - Analyst, Credit Strategy, CreditSights
Kathleen Tang - Analyst, Strategy, CreditSights
Luke Jensen - Analyst – Quantitative Strategy, CreditSights
5 November 2025
Insights into Pressure in the Pipes: Funding Stress Q&A report including:
Rates rising despite cash abundance: Private borrowing costs increased relative to Fed rates even with substantial money market fund liquidity.
Reserve drainage intensifies stress: Quantitative tightening now reduces system reserves as overnight reverse repo facility balances have depleted.
Flow constraints limit accessibility: Money market cash faces barriers reaching borrowers due to counterparty limits and balance sheet management.
Fed response options available: Reserve purchases or repo operations could address stress if pressures persist beyond typical month-end episodes.
Funding market participants exposed: Secured borrowers including banks, dealers and hedge funds face heightened costs from overnight market reliance.
Historical precedent suggests patterns: Previous funding stress episodes created entry points once Fed interventions stabilized market conditions.
Executive Summary
We provide a Q&A on current funding market stress and identify the main watch points for prospective credit and broader market effects.
We focus on what’s driving the stress, who’s most exposed, and how Fed quantitative tightening is influencing conditions. We outline the Fed’s potential policy tools, highlight and what credit investors should monitor.
We also explain why strains can emerge even amid abundant cash in money market funds.
